EPA warns of Keystone greenhouse gas impact

Published 4:14 pm, Tuesday, February 3, 2015

This May 24, 2012 file photo shows some of about 500 miles worth of coated steel pipe manufactured by Welspun Pipes, Inc., originally for the Keystone oil pipeline, stored in Little Rock, Ark.

This May 24, 2012 file photo shows some of about 500 miles worth of coated steel pipe manufactured by Welspun Pipes, Inc., originally for the Keystone oil pipeline, stored in Little Rock, Ark.

Photo: Danny Johnston

EPA warns of Keystone greenhouse gas impact

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WASHINGTON — The recent crash in oil prices casts doubt on the State Department's conclusion that the Keystone XL pipeline would not significantly drive up greenhouse gas emissions, the Environmental Protection Agency warned.

In a Feb. 2 letter to the State Department that was released Tuesday, the EPA said plummeting crude prices could make the proposed pipeline vital to Canadian oil sands developers that otherwise face higher costs to ship their crude by rail.

An earlier State Department analysis of the project found that Alberta, Canada's oil sands likely would be developed with or without Keystone XL. But the EPA noted that "this conclusion was based in large part on projections of the global price of oil."

With domestic West Texas Intermediate crude hovering around $50 per barrel, it's important to revisit that analysis, said EPA Assistant Administrator for Enforcement Cynthia Giles.

"Given recent large declines in oil prices and the uncertainty of oil price projects, the additional low price scenario (in State's analysis) should be given additional weight during decision making, due to the potential implications of lower oil prices on project impacts, especially greenhouse gas emissions," Giles said.

The State Department's environmental impact statement found that at sustained oil prices of $65 to $75 per barrel, the higher transportation costs of shipping crude by rail "could have a substantial impact on oil sands production levels" by changing the economics of that activity.

The EPA is one of eight federal agencies that were due Monday to weigh in with any views on Keystone XL, informing the State Department's ongoing analysis of whether the proposed border-crossing pipeline is in the national interest.

State Department spokeswoman Jen Psaki declined to say how many agencies filed the "internal" recommendations. But she noted that EPA's letter commented only on the State Department's environmental impact statement — and was not a recommendation on the national interest question.

Environmentalists quickly cheered the EPA's assessment, saying it gives the Obama administration new ammunition to reject the project.

Bill McKibben, co-founder of 350.org, and a leading opponent of the project, praised the EPA's :knife-sharp comments."

"The president's got every nail he needs to finally close the coffin on this boondoggle," McKibben said.

But some energy insiders weren't convinced. Kevin Book, managing director of ClearView Energy Partners, said in a research note that the general tenor of the EPA's comments were "positive" — "particularly when compared to comments the agency has provided regarding other infrastructure projects."

In addition to raising oil price concerns, the EPA emphasized the State Department's previous conclusion that the bitumen extracted from Canada's oil sands has a higher carbon footprint than other crudes.

"Until ongoing efforts to reduce greenhouse gas emissions associated with the production of oil sands are more successful and widespread. . . development of oil sands crude represents a significant increase in greenhouse gas emissions," Giles said.

TransCanada spokesman Shawn Howard noted that the emissions intensity for crudes derived from the oil sands is already going down — a trend documented in the State Department's environmental analysis last year.

Because there are more than 100 blends or grades of crude oils transported and refined in North America, there is no "average crude oil" with which to compare the bitumen or diluted bitumen coming out of Alberta, Howard added.

"When we look at the types of oils that Keystone XL will displace — from Mexico, Venezuela and other international sources — the Canadian and American oils produce similar or often lower greenhouse gas emissions," Howard said.

The EPA's comments could prompt the State Department to revise its environmental analysis before issuing a final decision on Keystone XL.